Crypto Market Rallies as CPI Report Fuels Investor Optimism

The cryptocurrency market climbed for a second day following the release of the latest Consumer Price Index (CPI) report, which showed U.S. inflation cooled in December.

Bitcoin (BTC) rose 3.2% to $99,290, while Ethereum (ETH) gained 4.3%, reaching $3,337. XRP soared 12% to an all-time high of $2.87, while Solana (SOL) spiked 4% to reach $194. The total market capitalization climbed 3.2% to $3.63 trillion, according to CoinGecko.

In the past 24 hours, 89,139 traders were liquidated, with total liquidations coming in at $240 million, according to CoinGlass. BTC accounted for around $56 million in liquidations, while ETH recorded $42 million in liquidations. Altcoins experienced around $29 million in liquidations.

CPI Sparks Optimism

December's CPI increase of 0.4% brought annual inflation to 2.9%, aligning with expectations, while core CPI rose 3.2%, slightly under forecasts. Shelter costs saw modest gains, marking their smallest annual rise since January 2022. The report, experts said, eased inflation fears, spurring stock market confidence and lowering Treasury yields.

“When the CPI report came out today, it lit a fire under both the stock market and the crypto markets,” James Lee, founder of investment management firm StratFi, told The Defiant. “The year-over-year (YOY) change for core Inflation was 3.2%, below the consensus estimate of 3.3%.”

This lower inflation gives the Fed leeway to cut interest rates, which typically results in higher prices for risk assets, including stocks and crypto.

“Interest rates have been one of the most important factors behind stock and crypto prices for the past five years,” Lee said. “Traders were overjoyed to see the core rate of inflation below expectations.”

Matt Mena, Crypto Research Strategist at 21Shares, echoed Lee’s sentiment, noting that the December CPI data removes the last major macroeconomic barrier keeping Bitcoin below $100,000 ahead of Donald Trump’s upcoming inauguration.

“With inflation continuing to cool, as headline CPI held steady at 2.9% year-over-year and core CPI eased to 3.2%, the stage is set for a dovish pivot by the Federal Reserve,” Mena said. “This shift aligns with futures markets pricing in stronger rate-cut expectations, creating a highly favorable environment for risk assets.”

Positive PPI Report

The positive CPI report comes on the heels of an equally encouraging Producer Price Index (PPI) report released yesterday.

That report showed a modest 0.2% monthly increase, below the expected 0.4%. Annually, the PPI rose to 3.3%, while the core PPI remained flat, contrary to forecasts of a 0.2% rise. These figures further signal easing inflation pressures at the wholesale level.